"Increase in price of good 'x' leads to increase in demand of good 'Y'." How the goods are related to each other?
Answer & explanation
Correct answer: option 4
If an increase in the price of good 'x' leads to an increase in the demand for good 'Y', then the goods are related as: Substitute goods.
Substitute goods are those that can be used in place of each other. When the price of one substitute good rises, consumers tend to shift their demand toward the other substitute good, leading to an increase in the demand for that good.